Sunoco Logistics Partners L.P. (NYSE:SXL) announced yesterday a definitive agreement to acquire Energy Transfer Partners LP (NYSE:ETP) in a unit-for-unit transaction at an implied price of $39.29 per unit, flat with its Friday close and a 10% premium to ETP’s 30-day VWAP. The deal is anticipated to close in the first quarter of 2017, with ETP unitholders receiving 1.5 SXL common units for each ETP unit owned, subject to customary closing conditions and the receipt of ETP unitholder approval.

Jefferies analyst Christopher Sighinolfi sees ETP as the real “winner” emerging from this deal and therefore reiterates a Buy rating on ETP with a price target of $47, which represents a 32% increase from where the shares last closed.

Sighinolfi believes, “While intra-family deals have occurred previously (ETP’s purchase of RGP, for example), we view today’s news as a pivot in ETE’s organizational strategy and one directly aimed at preserving cash flow & improving its cost of capital. Effecting for the terms of the transaction, the realization of anticipated annualized synergies & cost improvements, and the informal distribution growth guidance provided in the release (~10% annually), we see >$1B in cash flow savings through 2019.”

“So, as has been seen with other roll-in transactions (ACMP/WPZ, NGLS/TRGP), the most immediate & tangible benefit to the pro-forma SXL is a reduction in cash payouts, which can be used to help strengthen its balance sheet, limit capital market needs, improve cost of capital, and enhance future growth prospects. Importantly, ETE cash flow is preserved,” Sighinolfi surmises.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, five-star analyst Christopher Sighinolfi is ranked #209 out of 4,235 analysts. Sighinolfi has a 66% success rate and realizes 12.3% in his yearly returns. When recommending ETP, Sighinolfi yields 21.0% in average profits on the stock.

TipRanks analytics demonstrate ETP as a Strong Buy. Based on 8 analysts polled by TipRanks in the last 3 months, 7 rate a Buy on ETP, while 1 maintains a Hold. The 12-month average price target stands at $45.67, marking a 28% upside from where the shares last closed.

ETP stock price has been down since announcement, but investors’ knee-jerk reaction will prove shortsighted. Retained cash flow will increase at ETP through synergies, lowered distributions (everybody knew it had to happen eventually), and gradual debt reduction/lower finance costs. The dividend will still be huge, but now it will be totally safe because of dramatically improved distribution coverage ratio. Growth will be great, especially, with huge infrastructure spending expected under a Trump administration. Obviously, as the company increases its financial flexibility and lowers its cost of capital, it will be better able to capitalize on growth opportunities in Trump’s America. And growth always “Trumps” high dividends as valuation multiples expand, greater critical mass and higher margins are achieved, and new contracts are negotiated that reflect lower energy prices. Squeezing out every last dollar of cash flow in order to pay dividends gets you a mature company’s 6X EBITDA valuation; but demonstrating attractive growth opportunities and then executing on them will soon yield a higher valuation multiple, and safer company that people want to do business with, and much better outcome for investors. And there are few companies that can execute better operationally than ETP. They will be a killer winner over the next 4 years with a higher valuation to prove it! I have no biases; I just think this move by ETP will prove to be a stroke of genius, even though myopic investors, focused only of the dividend, don’t get it yet. They will, though, but maybe after missing the first 10-15% of the upside to come.